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Breaking: There should still be another rate hike in 2017 – Fed official

Federal Reserve Bank of New York President William Dudley said it isn’t unreasonable to expect the central bank to announce plans in September to start trimming its balance sheet and said he supports another interest-rate increase this year if the economy evolves as he expects.

“I would expect — I would be in favor of doing another rate hike later this year” if the economy holds up, Dudley said, speaking in an interview with the Associated Press.

Expectations for a September announcement on when the Fed will begin to wind down its balance sheet weren’t “unreasonable,” he said. A political debate over the debt ceiling is unlikely to have a “big impact” on that timetable because the central bank could announce the start of the program but delay the actual date.

“The plan is out there. It’s been, I think, generally well-received, and fully anticipated,” Dudley said of the outline for drawing down the $4.5 trillion balance sheet. “In the last FOMC statement, we said that we expected this to happen relatively soon. So, I expect it to happen relatively soon.”

Dudley’s comments signal optimism at a time when inflation remains below the Fed’s goal even as the labor market continues to expand and the overall economy is chugging along. The New York Fed chief brushed aside recent weak price data as a trend that will probably reverse, suggesting officials might be willing to look past the slowdown even as it becomes more sustained.

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